UK
government to encourage shareholder
activism by pension funds
Having
accepted the recommendations contained
in the Myners' Review of UK Institutional
Investment, produced last year, the
UK Government has published a consultation
document setting out how it intends
to implement those relating to shareholder
activism. In his report, Paul Myners
recommended that the law should impose
a duty, similar to that which already
exists in the United States, on those
responsible for investing pension scheme
assets, to engage with the management
of investee companies in order to address
corporate underperformance and enhance
the value of their investments. Broadly
speaking, the culture of non-intervention
by investors still persists in the UK.
Although it does not seek to make intervention
compulsory regardless of the circumstances,
the Government intends to encourage
wider use of "appropriate and informed
intervention" whether through the voting
mechanism or otherwise. It proposes
that those involved in pension fund
management should have a statutory duty
to use shareholder activism to intervene
in investee companies where this is
in the best interests of the pension
scheme, bearing in mind the costs involved.
The paper, entitled "Encouraging Shareholder
Activism", invites comments on its proposals
to achieve this and, in particular,
whether they should apply to trustees
as well as fund managers and how compliance
with the new statutory duty can be demonstrated.
In another consultation document, the
Government proposes that trustees should
be "familiar with the issues concerned"
when reaching investment decisions under
a new duty to act with care, skill,
prudence and diligence and invites comments
on how best to ensure this and on the
nature and provision of the training
required. The main issue raised in the
third consultation paper concerns action
that could be taken to improve the security
of pension fund assets, and whether
to legislate to require pension schemes
to have independent custodians, separate
from the sponsoring employer, or whether
to leave it as a matter of voluntary
'good practice'. Details of all three
discussion documents can be found on
the
government website
New
rights for UK investors to vote on directors'
pay
The UK government
has announced its intention to introduce
new rights for major investors to vote
on directors' pay, following growing
concerns over levels of remuneration
and a series of excessive pay-offs to
'failed' directors and senior executives,
of which the Marconi case is just the
latest and most dramatic example. The
proposals, reported in a Financial Times
article today (see below), will give
larger investors the right to vote on
certain aspects of directors' remuneration
in the annual report, rather than have
to object to the whole report or vote
on separate resolutions, as at present,
and will come into force in time for
the 2002 reporting season. It seems,
however, that the votes will have only
'advisory' rather than 'mandatory' status,
leaving companies free to ignore them
at their peril. Further details will
be available shortly and, while these
moves are to be welcomed, it remains
questionable how effective they will
be in curbing excessive remuneration
packages or moderating the activities
of remuneration committees without stronger
measures being included in the government's
future revision of UK company law.
Investors win right to vote on directors'
pay deals By Robert Shrimsley, Chief
Political Correspondent Published: October
18 2001 21:09 | Last Updated: October
18 2001 22:03 Companies will be obliged
to submit their directors' remuneration
to a shareholder vote every year under
measures to be unveiled by the government
on Friday intended to curb what ministers
see as excessive pay awards. The votes
will be advisory but ministers believe
companies would be foolish to ignore
an adverse result. The issue has been
highlighted in recent weeks by substantial
payouts to the ousted Marconi directors,
which have angered ministers and shareholders
who see them as "rewards for failure".
The vote will be on a report on all
directors' pay, rather than individual
packages. Patricia Hewitt, trade and
industry secretary, will make clear
she wants the report to set out in detail
the company's policy on linking pay
to performance and, in particular, its
payments to >directors whose policies
have led the company into difficulties.
The requirement will be introduced by
statutory instrument which will allow
it to pass into law before the next
companies bill, expected in the next
two years. The proposals, which were
signed-off by Downing Street this week,
were welcomed by the National Association
of Pension Funds. David Gould, investment
director, described the plan as "very
good news for shareholders". He said
votes were already taking place at some
companies but only about 10 per cent
of the FTSE 350 businesses had held
a vote this year.
European Social
Partners' Negotiations on Telework
To start October
12 Brussels, 27/09/2001 In a letter
addressed to Ms Anna Diamantopoulou,
Social Affairs Commissioner, ETUC, UNICE
and CEEP indicate their decision to
open negotiations on Telework on October
12. European Social Partners are aiming
at an agreement to be implemented by
their affiliates in all EU member states
to regulate telework
ETUC and CEEP
are together proposing a regulatory
framework for services of general interest
After the meeting
in Brussels on 4 and 5 October 2001in
which Erik Carlslund (ETUC), Alain Wolf
(CEEP), Emilio Gabaglio (ETUC), Marc
Girardot (CEEP) participated , the ETUC
and the CEEP (European federation of
public-owned enterprises) are set to
present a proposal for a EU framework
directive on services of general interest.
The intention is to make a joint submission
to the Laeken European Council.
AFL-CIO
Workers' Rights in America
A new study has
been published by the AFL-CIO on workers'
rights. Interviews with about 1800 adult
persons show that workers believe employers
do not care sufficiently for workers
rights and are calling for more laws.
"While U.S. workers are calling for
more laws, they mistakenly think they
have more legal rights in the workplace
than they actually do. Many “rights”
they consider essential—such as sick
leave, protection from being fired without
cause and personal privacy on the job—are
not rights protected by the law at all.
In two areas workers are clear that
laws protect workers’ rights: They know
workers cannot legally be discriminated
against because of race or ethnicity,
and it is illegal to fire workers for
supporting a union." A question that
remains to answer is if these workers
will conclude that they should join
unions to improve their conditions?
http://www.aflcio.org/rightsinamerica/report.htm
